The Federal Board of Revenue has set a seven-day deadline for Commissioners Inland Revenue to issue withholding tax exemption certificates to builders and developers operating under the special tax regime. The directive was issued through Circular No. 08 of 2025-26, clarifying the applicability of withholding tax under Section 236C of the Income Tax Ordinance, 2001, for those covered under Section 7F. Under the new framework, if an applicant fulfills all conditions and the Commissioner fails to act within seven working days, the exemption certificate will be automatically issued through the IRIS system.
The circular replaces the earlier Circular No. 7 issued on March 31, 2026, and aims to address concerns raised by the construction and development sector regarding tax treatment. Section 7F provides a special tax regime for certain builders and developers, where income is calculated as a fixed percentage of gross receipts and taxed under the head “Income from Business.” The FBR clarified that withholding tax under Section 236C, which is generally adjustable against capital gains, creates a liquidity burden for such taxpayers as their income is not assessed under capital gains. It stated that builders and developers who have discharged their tax liability under Section 7F and do not have other taxable income against which withholding tax can be adjusted may apply for exemption.
Applications can be submitted to the concerned Commissioner Inland Revenue under Section 159 for non-collection of advance tax on transactions involving the sale of immovable property. Commissioners have been directed to review applications on a case-by-case basis, ensuring compliance with all conditions before granting exemption in accordance with the law.